Compass Point Downgrades Marathon Digital to Sell Amid Cash Burn Concerns

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Compass Point downgraded Marathon Digital Holdings (NASDAQ: MARA) from neutral to sell on Tuesday, citing “unsustainable cash burn” that could lead to shareholder dilution.

The move comes ahead of Marathon Digital’s Q1 earnings release, scheduled for May 8 after market close, and reflects mounting concerns about the company’s core business economics.

“There’s better ways to get BTC beta,” analysts wrote in their note, highlighting Marathon’s hash price — now below 5.5 cents — as a signal that the mining operation is rapidly losing profitability. At current operating conditions, Compass Point estimates that the company is consuming more cash than it generates, putting it on a precarious financial trajectory.

Also read: Bitcoin to Reshape Corporate Treasuries with $330B in Forecasted Inflows

In conjunction with the downgrade, Compass Point also sharply lowered its price target for MARA stock from $25 to $9.50, implying more than 25% downside from its current trading level of around $13.

Bitcoin Mining Model Faces Mounting Pressure

Marathon Digital’s business revolves around mining Bitcoin — a process that requires massive energy consumption and high-end hardware to generate rewards in the form of BTC. However, as block rewards diminish post-halving and electricity prices remain high, the economics of Bitcoin mining are under significant stress.

Bitcoin hashrate (Source: Blockchain.com)

Compass Point’s report suggests that Marathon’s operational structure is particularly vulnerable in this environment. Unlike some competitors that have diversified into AI or cloud infrastructure, Marathon remains tightly bound to Bitcoin mining alone, with little margin for error.

The downgrade also reflects broader bearish sentiment across the high-performance computing (HPC) and AI infrastructure sectors. Companies like Core Scientific (CORZ) and TeraWulf (WULF) have underperformed significantly in 2025 as investor excitement surrounding AI has cooled.

Also read: Bitcoin Accumulation Accelerates as Semler and Strategy Expand Holdings

HPC sector valuations, once as high as 15x earnings, have compressed to around 5x amid concerns over customer concentration, reduced capital expenditure from cloud giants like Microsoft, and intensifying competition.

While Compass Point noted potential long-term demand for AI infrastructure remains strong, current conditions are unfavorable — particularly for firms without diversified revenue streams.

Marathon Digital and Mining Stocks See Steep 2025 Declines

Marathon stock is down 25% year-to-date, while the broader bitcoin mining ETF, WGMI, has fallen 37%. These figures show the challenging environment facing mining companies in 2025, especially those that fail to adapt to the post-halving economics and shifting investor expectations.

Marathon Digital stock chart (Source: Google Finance)

With Marathon’s earnings call is around the corner, investors will be watching closely for updates on cash flow, operational efficiency, and future strategy. Until then, Compass Point is advising caution.

Author

Steven Walgenbach

Steven's passion for cryptocurrency and blockchain technology began in 2014, inspiring him to immerse himself in the field. He notably secured a top 5 world ranking in robotics. While he initially pursued a computer science degree at the University of Texas at Arlington, he chose to pause his studies after two semesters to take a more hands-on approach in advancing cryptocurrency technology. During this period, he actively worked on multiple patents related to cryptocurrency and blockchain. Additionally, Steven has explored various areas of the financial sector, including banking and financial markets, developing prototypes such as fully autonomous trading bots and intuitive interfaces that streamline blockchain integration, among other innovations.

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